Businessweek Archives

How To Really Protect Pensions

October 09, 1994

Readers Report

HOW TO REALLY PROTECT PENSIONS

Asking corporations to pay more to the Pension Benefit Guaranty Corp. is only going to jeopardize those companies that are trying to survive in today's difficult economy ("Harsh medicine for ailing pension plans," Government, Sept. 19). I suggest that Congress pass a law that gives the pensioner--rather than stockholders and creditors--first claim on the assets of a bankrupt company. That would protect the pensioner and cause stockholders to make sure that corporate pension plans were fully funded.

Robert Wintermeier

Croton, N.Y.

Your article reveals how the public--Congress included--is at the mercy of the PBGC's self-serving analyses. The $2.9 billion deficit, for example, is puffed: $1.6 billion is called "net claims for probable terminations," and its addition as a real liability violates the letter and spirit of generally accepted accounting principles. Up to $1 billion is due to two successive improvements in the PBGC's assumed mortality rates, for which no need was shown. And interest rates have climbed since 1993, when the $2.9 billion was calculated, evaporating an additional half-billion or so.

We therefore are looking at a phantom deficit. An analysis of the $53 billion in plan underfunding demonstrates that isn't what the PBGC claims, either. A badly misinformed public is a dubious basis for the passage of the PBGC's pension-reform bill.

David Langer

Chairman

Employee Benefits Committee

Actuarial Society of Greater New York

New York

Let's put the blame for underfunded pension plans where it belongs: on the U.S. government. Underfunded situations predominately occur in plans for hourly union employees. This is because future negotiated benefit increases are not allowed to be figured in when determining tax-deductible pension contributions. For salary-based plans, future pay increases are taken into account. Without the tax benefit, there is little incentive to fund hourly plans. The "fix" then would be to change the tax law, not to increase PBGC premiums. This would get the money into pension plans, where it belongs. While the Clinton Administration did not create the problem, it would be an error on their part to try curing the symptom and not the disease